It is purely financial engineering that relies on an asset price increasing in value. I know plenty of people that have bought investment properties without doing any due diligence on the fundamentals of the property market and have come unstuck. They have been sucked in by the illusion of tax breaks and think that they are the magic ingredient. The first property I bought, I bought because I needed to live somewhere and over that time, in that area property values went backwards over a period of a decade.
I understand gearing and have been positively geared into asset several times. Being negative geared and getting tax breaks on it’s own is not a sure fire method to wealth creation, it relies simply on the asset that is geared achieving an acceptable increase in capital growth. The idea that property values only ever increase is a myth.
